The Ukrainian authorities understand that they cannot raise gas prices for households at the moment, Ukrainian President Viktor Yanukovych said at a press conference in Kyiv on Wednesday.
"Of course, we see that further raising [the rate on gas] is impossible. We can’t transfer this problem to our citizens, which is why we did not raise the tariff by 50%, as the International Monetary Fund (IMF) requested," he said.
Raising the price of gas for households is one of the IMF’s stringent conditions in allocating the next tranche of its loan to Ukraine in a Stand-By Arrangement (SBA).
When asked whether agreement on a new reduction in the price of Russian gas could make the IMF drop its demand that Ukraine increase gas tariffs for households, Governor of the National Bank of Ukraine (NBU) Serhiy Arbuzov did not rule out "that under this scenario, a compromise satisfying both parties will be reached."
In the fall of 2008, the IMF decided to disburse about $17 billion to Ukraine under the SBA. Under the 2008 SBA, Ukraine received only three tranches worth almost $11 billion.
The allocation of the fourth tranche, worth $3.8 billion, was scheduled for November 2009 following the third review of the IMF’s cooperation program with Ukraine.
However, it did not issue a positive statement on the completion of the review, and Ukraine never received the fourth tranche.
After the presidential election and government reshuffles in Ukraine, the 2008 SBA was suspended, and the IMF decided to renew its loan partnership with Ukraine in the summer of 2010 through a new SBA worth SDR 10 billion (about $15.6 billion).
In late July 2010, Kyiv received the first tranche of SDR 1.25 billion under the new program. The IMF decided in December 2010 to allocate a second tranche worth SDR 1 billion.
The program foresaw future quarterly allocation of eight more tranches starting from the middle of March 2011 in case of further successful cooperation.
However, an IMF mission that worked in Kyiv in March 2011 could not recommend to the IMF Executive Board that it approve a new tranche for Ukraine.
The IMF had expected Ukraine to approve pension reform and settle the problem of low prices of natural gas for households.
On Nov. 4, 2011, an IMF mission released an announcement after its work in Kyiv from Oct. 25 to Nov. 3, 2011, according to which the mission had taken a pause to carry out additional technical work. Discussions of economic policy in Ukraine are expected to begin again soon.
Ukrainian Deputy Prime Minister and Social Policy Minister Sergiy Tigipko and Finance Minister Fedir Yaroshenko early in November 2011 went to Washington, D.C., in the United States, to hold talks with the IMF, the outcome of which has not been made public.
Ukrainian Prime Minister Mykola Azarov said on Nov. 4 that Ukraine would start working with the IMF on adjusting the cooperation program for after the completion of talks with Russia on natural gas prices, which was expected to happen in November 2011.
Ukraine’s government said that due to the delay in the financing, two tranches of the stand-by loan could be combined, which would help replenish the NBU foreign exchange reserves with about $3 billion.
